Sweetheart Deal for Kentucky Uranium Enrichers, Bad Deal for America

The Department of Energy (DOE) holds approximately the equivalent of 59,000 tons of natural uranium. This includes low-enriched uranium, highly enriched uranium, depleted uranium left over from past enrichment, and natural uranium. With additional processing, much of it could be used to fuel America’s nuclear reactors. Depending on the spot price of uranium and the process required to get it to usable form, the DOE’s excess uranium is worth approximately $7 billion.

Leaving the uranium under government control makes no sense. It not only denies taxpayers the value of the asset but costs them additional dollars to store and to maintain it. Further, it denies American electricity consumers access to a valuable energy resource. But releasing this uranium must be done in an organized way to maximize taxpayer benefit without undue disruption to global uranium markets.

The best way to achieve this is to release all the uranium through a system of competitive bidding over a specified period of time—say, 10 years. This would ensure that taxpayers receive fair value for the assets and allow the uranium to be introduced in a limited way over a predictable time period.

The House is currently considering H.R. 2054, the Energy and Revenue Enrichment Act of 2011, which would allow about $1 billion worth of DOE’s depleted uranium to be re-enriched and sold into the market. Unfortunately, it rejects the competitive bidding process by defining the type of company that could engage in the re-enrichment in such a way that only one company could meet the conditions.

Specifically, the bill states that an enrichment plant means:

A uranium enrichment plant owned by the Department of Energy with respect to which the Nuclear Regulatory Commission has made a determination of compliance under section 1701 (b) (2) of the Atomic Energy Act of 1954.

It goes on to define the operator of said enrichment plant as:

A company that has experience in operating an enrichment plant under the Nuclear Regulatory Commission authorization and has the ability and workforce to enrich the depleted uranium that is owned by the Department of Energy.

Only one company meets the conditions set forth by these term: the United States Enrichment Corporation (USEC), the former government-owned enrichment company that operates a facility in Paducah, Kentucky, that employs 1,200 and will likely shutter if it does not get this contract.

Translation: This is a not very well-disguised attempt to give a sweetheart deal to a specific company. These used to be called earmarks.

There are many problems with this approach:

It removes competition. Although the legislation says that the Secretary of Energy “shall seek to maximize the financial return to the Federal Government,” it creates a situation where there is only one bidder for services. This is unjustified when other companies could compete for the contract. The unfortunate part is that USEC may well win the contract regardless. But because the legislation removes competition, it would now be able to inflate its prices at taxpayer expense.

It limits options. The underlying premise of the legislation, besides being a jobs program for western Kentucky, is to generate funds for the federal government while disposing of a liability. But it makes a critical error in both regards by assuming that Congress can best define how to achieve those worthy goals. A better approach is to issue a request for proposal to dispose of DOE’s depleted uranium. Then companies can determine how best to meet those objectives through a competitive proposal process. Some may choose the process currently envisioned by the legislation; others may come up with a better approach.

It stifles innovation. Because the legislation removes competition and defines specifically how to meet its objectives, it takes away the opportunity for companies to bring new and innovative approaches to helping the government to dispose of its uranium. Although the nuclear industry has not built a new reactor is decades, it is very active in the fuel sector, plant operations, and nuclear site clean-up. These are the areas of expertise that could be brought to bear for the DOE’s disposition program. But this legislation prohibits that.

It costs taxpayers. The lack of competition and limits on innovation will yield inflated prices. Even if USEC eventually won the bid, the competitive process would ensure that it provided its service at the best possible price.

All We Are Saying Is: Give Competition a Chance

Competition serves consumers and industry. It gives consumers low prices and new products while forcing industry to innovate and maximize efficacy. While sweetheart deals, special treatment, and other breaks may seem to have some short-term benefit to their recipients, the fact is that it promotes technological stagnation and poor business practices. This is the wrong model for America’s nuclear industry.

Join The Discussion

This really sounds like a good deal until you start to take it apart. First, this legislation is expanding government at the expense of private industry. Presently there are about 2,000 soles activity involved in producing uranium from approximately 6 western states. These soles produce approx 4 million pounds a year while our nuclear fleet requires 60 million pounds annually. If you think the importation of oil into this country is outrageous, I can assure you that the United States now has become totally dependent on less stable government to fuel our reactors. So you might be thinking at this moment that that would be a good reason to start the reprocessing efforts in Kentucky.. This would make the US Government in direct competition with private industry. An industry that is attempting to revitalize again to being a world producer and allowing this country develop good paying jobs while ensuring independence on others for our energy needs.. This proposal is a slab at private enterprise for the benefit of a monopoly. Utilities also benefit from this arrangement. This country has never had an energy policy and passing this cockamamy pork is only a temporary fix for the governmental addict. If more uranium were mined in this country there would be more enrichment opportunities for Kentucky….

If all that Uranium wre put into a power plant and the electricity sold, how much money are we talking about then. And How many years worth of teh entire US electric grid would that power?. Selling this resource is about as smart as selling our crude oil from the Gulf to another country.

By Jack Spencer The Department of Energy (DOE) holds approximately the equivalent of 59,000 tons of natural uranium. This includes low-enriched uranium, highly enriched uranium, depleted uranium left over from past enrichment, and natural uranium. With…

There are only 2 enrichment plants currently operating in the US. USEC's Paducah plant, and LES's New Mexico plant. Considering USEC's expertise and capacity, they are the logical choice for such a contract. Combine that with USEC being a wholly US owned and operated company, I think it is a good deal for the US as a whole. The industry has very low domestic competition. Urenco's LES has only been operating their plant for a few months. USEC's Paducah plant has been the backbone of US enrichment for decades.

In my opinion, your stumping for competitive bidding in the industry is premature, as competition is years away.

USEC is the only organization in the United States that is a privately run, American run company that enriches uranium. Per the bill, USEC is the only organization that has been exposed to transuranics and qualifies. For those of you who don't know, the tails program is a pilot program that has been established to create a 2 year window to see if it can be successful. The cylinders are already in Paducah, Kentucky which would save tax payers from spending money on transportation. On an extremely positive note, the House Energy and Commerce Committee claims, via GAO, that there is a potential $20 BILLION worth of energy sitting and wasting space as a liability. So continue to speak as if you have an understanding when the only other competitor is foreign owned and to the best of my knowledge not fully operational and producing. But I could be wrong on Urenco, if I am I apologize in advance.

The OTHER really important thing that Jack Spencer failed to include was that by Heritage Foundation opposing this bill proposed by Mitch McConnell, Ed Whitfield & Rand Paul (all representing the people of KY) Heritage Foundation will effectively lead the charge to bankrupt and close down the town of Paducah, KY,as the uranium enrichment plant located there is one of the main employers of Western KY. Effectively ALL Heritage Foundation is saying is go ahead and put another 1200 families on welfare. As a conservative who would normally support the views/principles of the Heritage Foundation, I cannot understand the opposition to this bill and the lack of real information concerning the true issues. United States Enrichment Corp. as John commented before is privately run and an American company. I personally object to Mr. Spencer's use of "a sweetheart deal" the only DEAL here is KY's representatives looking out for their own constituents which is what more of our elected officials should be doing.

What many people do not remember is that USEC tried to push a previous arrangement several years ago. Their "self written", "self promoted" failed piece of legislation only served to illustrate their intent to promote corporate greed at the highest level.

The only part of the article that I do not understand is the statement that states if USEC were to win under an open contract, that this would somehow be "unfortunate". if the premise of the objection is an absence of competative bidding, then whomever wins under such a format should then be acceptable.

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